EIS EXAMPLES INCOME TAX RELIEF Example:
INITIAL INVESTMENT
£10,000
Less Income Tax Relief @ 30%
(£3,000)
Net Cost of Investment
£7,000
Qualifying investors can credit the amount of funds subscribed for eligible shares against their total liability to Income Tax for the tax year that shares are issued and also the preceding year. Relief is available against a United Kingdom Income Tax liability, irrespective of whether or not the investor is resident in the UK. Please note, the amount of relief given cannot exceed an investor’s tax liability. A qualifying individual can claim to ‘carry back’ up to £500,000 of their EIS investment to the previous tax year, thereby enabling Income Tax already paid to be reclaimed. ‘Carry Back’ allows that, if no investment had been made in the previous tax year, up to £1,000,000 could be invested in the current tax year
CAPITAL GAINS TAX RELIEF Example:
Realised Value Of Shares After 3 Years
£25,000
Less original gross investment
£10,000
Profit; free of Capital Gains Tax
£15,000
Any capital gain accruing to the original investor on disposal of their shares is exempt from Capital Gains Tax if the shares have been held for at least 3 years. Please be aware that if no claim to Income Tax relief is made, then subsequent disposal of the shares will NOT qualify for exemption from Capital Gains Tax.
CAPITAL GAINS TAX DEFERRAL Example:
Gross investment
£10,000
Less Income Tax relief (30% of £10,000)
£3,000
Cost of investment
£7,000
Capital Gains Tax liability deferred *
£2,800
Net initial cost of investment
£4,200
* CGT assumed at 40%, the gain is deferred until there is a chargeable event, such as a disposal of EIS shares or, if earlier, a breach of the EIS rules. The liability to Capital Gains Tax arising on the disposal of any asset may be deferred by investing the gain in eligible EIS shares. Investment must be made within the period beginning one year before and ending three years after the event which gives rise to the gain being deferred. Although there is a limit of £1,000,000 for Income Tax relief and Capital Gains Tax relief there is NO LIMIT on the amount of gains that can be deferred. CONFIDENTIAL - DO NOT DISSEMINATE. This business plan containsThis confidential, trade-secret information and is shared only with the understanding that you CONFIDENTIAL - DO NOT DISSEMINATE. business plan contains confidential, trade-secret information and will not contents that or ideas third parties the parties express written consent the of plan author. is shared onlyshare with theits understanding you will with not share its contents or without ideas with third without the express written of consent the plan author.
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